2006 (3) TMI 44 - AT - Central Excise

Central Excise - The finding of Adjudication and Commissioner (Appeals) are differ from each other as one holds that two units were separate legal entities and other holds that two units were not legal entities and their clearance needed to be clubbed - SCN found to be time barred

Summary

Issues:
1. Whether two separate units operating from the same premises can claim separate exemption under Notification No. 7/97.
2. Whether the two units were rightly held to be one and the same entity by the authorities.
3. Whether the show cause notice invoking extended period on the grounds of suppression is maintainable.
4. Whether the demand raised by the department is sustainable.
5. Whether the demand is barred by limitation.

Analysis:

Issue 1:
The case involved two units registered separately but operating from the same premises. They claimed concessional rate of duty under Notification No. 7/97. The Central Excise department alleged that the units were one and the same, misrepresenting themselves to claim benefits. The Assistant Commissioner and the Additional Commissioner held that separate exemption cannot be claimed by both units if operating from the same premises. The Commissioner (Appeals) upheld this view, stating that both units were essentially the same entity with different names.

Issue 2:
The appellants argued that the department was aware of the commonalities between the units, as evidenced by previous show cause notices. They contended that the show cause notice invoking the extended period on grounds of suppression was not maintainable. The authorities, however, maintained that the units were not distinct legal entities and clubbed their clearances. The Tribunal found the show cause notice to be vague, with conflicting allegations, and ruled in favor of the appellants.

Issue 3:
Regarding the demand raised by the department, the Tribunal noted discrepancies in the authorities' findings. While one authority held the units to be separate legal entities, the other considered them as one entity created to evade tax. The Tribunal found that the demand was not sustainable as the ground plans for the units, indicating separate machinery use, were approved by the Jurisdictional Superintendent after verification.

Issue 4:
On the question of limitation, the Tribunal found uncertainty in the adjudicating authority's order regarding negligence or deliberate intention to evade duty. The Tribunal held that since the authority itself was unsure, the demand was hit by limitation. Additionally, the Tribunal noted that the department was already aware of the commonalities between the units due to previous show cause notices, further supporting the limitation argument.

Conclusion:
The Tribunal allowed the appeals, setting aside the orders of the lower authorities both on merits and on limitation. The judgment highlighted the inconsistencies in the authorities' findings, the vagueness of the show cause notice, and the lack of sustainability of the demand raised by the department.